Why crowdsource funding sites might not be all they’re cracked up to be

Bus monitor Karen Klein talks about being bullied by a group of students in a video that went viral. (CBC Phot …Crowdsource funding websites like Kickstarter, IndieGoGo and RocketHub can be a huge help for those looking for some financial backing. There are numerous artists, musicians, game developers, inventors and charitable causes that have benefited from receiving financial support from strangers.

But recent statements from a Kickstarter board member has thrown into question whether those crowdsourcing websites can protect the people who invest in projects. Put simply, they can't.

In an interview with Polygon, the board member said that they can't protect backers, "because Kickstarter is more a platform than a business," writes blogger Emily Gera. Their terms of service state that while they take a 5 per cent cut from funds raised through their website, they are the platform and aren't directly involved in dealings between users.

Backers of Mythic: The Story of Gods and Men know this all too well, as the video game project was revealed to be a scam by online communities including Reddit and Rock, Paper, Shotgun back in April. Members of these communities discovered that the concept art and company office photos had all been stolen outright from other sites, or cobbled together from outside sources. The backers didn't lose any money, as the money is only taken from accounts once the project reaches its minimum amount (Mythic only got around $5,000 of their $80,000 goal), but had they reached their funding goal, a lot of people would have been out of pocket without any protection from Kickstarter.

That unfortunate situation is just one example of what can happen when people are given the opportunity to ask anonymous donors for money with only a moral obligation to fulfill whatever they're promising if they successfully raise enough funds.

The situation can be even more treacherous for those looking to raise money for charitable causes. A spam email asking you to send money to someone stranded in Nigeria is easy to dismiss as a hoax, but a heartfelt plea for funding through sites like IndieGoGo or GiveForward can be more challenging to recognize the real from the fake.

The positive impact that these fundraising sites have is undeniable; two recent examples include a fundraiser for dying lacrosse player Chris Sanderson's family to visit him, which generated over four times the requested $3,500 needed, and the viral campaign to give bullied bus monitor Karen Klein a vacation, which has generated over $650,000 in donations so far.

[ More from The Right Click: Karen Huff Klein, bullied bus monitor, to get best vacation ever thanks to Internet ]

But where there are people willing to give money for a good cause, there will undoubtedly be a small group willing to take advantage of them. A story came to light earlier this week when a father found out his son's photo was being used as part of a scam on IndieGoGo. Someone put the photo of the deceased soldier up on Craigslist and IndieGoGo, claiming that the man was her twin brother who had been severely injured while on a tour of duty. The fundraiser was pulled down when someone who had served with the deceased soldier recognized the photo.

"Think of all the things someone could scam, and this is pretty low," said Dr. Brian Fennerty, father of the fallen soldier, to the Pensacola News Journal. "I want this exposed. I just wish there was a way to keep this sort of thing from happening again."

What will likely keep the world of crowdsource funding unregulated is the low financial contribution people make. The average pledge amount on Kickstarter is $71, while the most common pledge amount is $25. Since people aren't generally being scammed out of large sums of money, the oversight on crowdsource fundraising projects isn't likely to change.

"Here's the deal," said Kickstarter advisor and board member Sunny Bates to Polygon. "It's one thing to be scammed like Bernie Madoff, where you've gone and you've been seduced by something and put in all your life savings. It's another thing for something not to come through for $25."